By Swati Bhat
MUMBAI (Reuters) - The rupee hit its lowest level in 11 months on Friday weighed down by in-line growth data and dwindling hopes of another rate cut at the RBI's upcoming policy review in mid-June.
However, dollar sales by a large petrochemical company helped the rupee stage a late recovery. Some traders said there were also rumours of the central bank having stepped in via state-run banks, to prop up the rupee, though that was not a universal view.
The local unit however fell 4.8 percent in May, posting its worst monthly fall since May 2012, and was the worst performer in Asia during the month.
The fall in the rupee, which started due to weak domestic fundamentals like a record current account deficit and still high inflation, was accentuated by the recent global dollar rally after talk the U.S. Fed may gradually phase out its asset purchases.
"The rupee fell sharply due to continued dollar buying by defence and oil firms. Foreign banks were also buying likely for squaring off their offshore positions," said Naveen Raghuvanshi, a senior forex dealer with Development Credit Bank.
"State-run banks and a large oil company likely sold once rupee hit 56.75 levels, helping the recovery. I expect the pair to hold between 56-57 range next week as there are unlikely to be any strong triggers to push it outside that range immediately, though a record low may not be too far," he added.
The partially convertible rupee closed at 56.4950/5050 per dollar, 0.2 percent below Thursday's close of 56.38/39. The unit dropped as low as 56.76, its weakest level since June 28, 2012.
On the week, the unit dropped 1.5 percent.
Traders said the central bank governor's comments on Thursday and the in-line growth data on Friday has squashed hopes for a rate on June 17.
India's economic growth began a feeble recovery in the first quarter of 2013, but weak private consumption, capital investment and slowing public spending offered little hope for a fast rebound in coming quarters.
Central bank chief Duvvuri Subbarao warned of upside risks to inflation and expressed worry over the country's high current account deficit on Thursday.
Some dealers said after the governor's comments the chances of an intervention to prop up the currency are lower.
In the offshore non-deliverable forwards, the one-month contract was at 56.90 while the three-month was at 57.47.
In the currency futures market, the most-traded near-month dollar/rupee contracts on the National Stock Exchange, the MCX-SX and the United Stock Exchange all closed at around 56.82 with a total traded volume of $6.66 billion. (Editing by Sunil Nair)
